SANAA Yemeni water trader Mohammed al-Tawwa runs his diesel pumps day and night, but gets less and less from his well in Sanaa, which experts say could become the world's first capital city to run dry.

"My well is now 400 meters (1,300 feet) deep and I don't think I can drill any deeper here," said Tawwa, pointing to the meager flow into tanks that supply water trucks and companies.

From dawn, dozens of people with yellow jerricans collect water from a special canister Tawwa has set aside for the poor.

"Sometimes we don't have any water for a whole week, sometimes for two days and then it stops again," said Talal al-Bahr, who comes almost daily to supply his family of six.

The West frets that al Qaeda will exploit instability in Yemen to prepare new attacks like the failed December 25 bombing of a U.S. airliner, but this impoverished Arabian peninsula country faces a catastrophe that poses a far deadlier long-term threat.

Nature cannot recharge ground water to keep pace with demand from a population of 23 million expected to double in 20 years.

More water is consumed than produced from most of Yemen's 21 aquifers, especially in the highlands, home to big cities like Sanaa, with a fast-growing population of two million, and Taiz.

"If we continue like this, Sanaa will be a ghost city in 20 years," said Anwer Sahooly, a water expert at German development agency GTZ, which runs several water projects in Yemen.

Some wells in Sanaa are now 800 to 1,000 meters deep -- requiring oil-drilling equipment -- while many are no longer usable because of the sinking water table, he said.

Millions of thirsty Yemenis may eventually have to abandon Sanaa and other mountain cities for the coastal plain. "Water refugees" may try to migrate to nearby Gulf states or Europe.

Diplomats say fights over water use have erupted in some tribal areas. Several orange orchards have run dry in Saada, a northern province already racked by a conflict with rebels who agreed a fragile ceasefire with the government last week.

"From a Yemeni perspective, al Qaeda is a smaller problem than water. What do you do if big cities have no water? Who would want to commit any investment here?" asked one diplomat.

NATIONAL DRUG HABIT

The crisis is worsened by excessive irrigation by farmers growing qat, a mild narcotic leaf that dominates life in Yemen, where most men spend half the day chewing it, even at work.

Agriculture accounts for more than 90 percent of water use, of which 37 percent goes to irrigate qat, GTZ estimates.

Qat also eats into family budgets, aggravating poverty and leading to under-nutrition of children and others, experts say.

"Qat is the culprit," said Sahooly, at the Sanaa water authority office where he works as an adviser. "It is a dangerous crop that will lead us to disaster."

Government policies are also to blame. Diesel subsidies, due to cost the state $2 billion this year, indirectly encourage qat farmers, or well-owners like Tawwa, to pump more water.

Yemen has overhauled water use regulations, but Sahooly said this would be ineffective unless President Ali Abdullah Saleh enforces restrictions on wildcat drilling and qat cultivation.

He contrasted Yemen's plight with neighboring Oman, whose government has made water conservation a top priority. No new well can be drilled there without the sultan's approval.

The absence of local utilities to manage water resources has sharpened grievances in remoter areas of Yemen, says Christopher Boucek of the Carnegie Endowment for International Peace.

"The failure to establish local water corporations in several governorates that historically have not received much support or social services from the central government has raised fear that a resurgent al Qaeda may seek refuge there," he argued in written testimony to the U.S. Congress this month.

Yemen should import qat from East Africa and spur farmers to produce cereals to cut water consumption and dependence on food imports, both Carnegie and GTZ recommend to the government.

Yet at Sanaa's bustling qat market, merchants shrug off talk of the unfolding water disaster.

"It's true that qat uses much of our water but Yemen cannot live without qat," said Heniar al-Qaidasi, handing bags of qat to customers to sample at the peak lunchtime sales period.

"It's the biggest employer of farmers and traders. Where would the jobs come from if qat production were stopped?"

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